Good morning, everyone, and welcome to the Archer 1st Quarter 2024 earnings release call. My name is Drew, and I'll be the operator for today's call. After today's presentation, we will begin the Q&A session. To register a question, please press star, followed by one on your telephone keypad. To withdraw your question, please press star, followed by two. With that, I'll hand over to Dag Skindlo, CEO. Please go ahead.
Thank you, Drew. Good morning, ladies and gentlemen, and thank you for joining this conference call for the first quarter 2024. Archer's Chief Financial Officer, Espen Joranger, is joining me on the call today. Moving to slide two, I would like to note that information provided in today's call includes forward-looking statements as well as non-GAAP financial measures. Forward-looking statements do not guarantee future performance and involve risk and uncertainties. Further information about these risks and uncertainties is set forth in our most recent annual report for 2023. Next slide, please. Just to remind everyone of the core of Archer, the well company. What we do is to drill wells and provide technology and services to ensure that the well is performing. Another key aspect of Archer is our growth track record. Please see the graph to the right.
Archer has, over the last few years, delivered significant growth in earnings, and last year we grew EBITDA by 36%, and this year we guide for further 15%-20% growth. We need to combine this earnings growth with increased cash contribution. Our cash contribution has also grown over the last years, and it's set to grow further this year. One of our primary targets is to delever Archer over time. This will increase our financial flexibility and create value for all stakeholders. Over the last years, also fueled by the refinancing in 2023, we have reduced our leverage ratio to below 2.8 at the end of Q1. Next slide, please. Q1 was another good quarter of growth. Revenue of $308 million is a 16% increase year-over-year. EBITDA was $32.9 million, while reported EBITDA came in at $30.9 million.
The growth in reported EBITDA was 23% over first quarter last year. Furthermore, cash contribution increased by 39% from first quarter 2023. I am pleased to say that we added more than $1 billion in firm backlog during the quarter, which increases visibility and stability while improving our growth outlook. Following the end of the quarter, we announced the acquisition of the majority stake in Vertikal Services in Norway. Finally, we executed a share consolidation, which came into effect today, where 25 old shares were consolidated into one share. Our share price closed yesterday at NOK 1.17. If the opening value today is the same as closing yesterday, the new quoted share price should be NOK 29.29. Next slide, please. In March, we announced our plan to acquire 65% of the shares in Vertikal Services. Vertikal Services is a Norwegian energy service company established in 2003 based in Volda.
With its 125 employees, Vertikal provides inspection, installation, and maintenance services to the oil and gas industry, wind industry, and to the hydropower industry. We are excited about this acquisition as Vertikal's business aligns well with Archer's core oil and gas capabilities while opening avenues for growth in renewable sectors such as wind and hydropower, and we anticipate synergies and growth potential from the acquisition. We have also acquired a business at attractive terms, around 3x 2024 earnings, which is accretive for Archer. Next slide, please. We have, since the beginning of the year, secured multiple contracts for platform operation and land drilling, adding a total of $1 billion in firm backlog. First in January, we announced award of two contracts in Argentina. The first contract was a 2.5-year contract extension on improved terms for 3 drilling rigs operating on Pan American's Cerro Dragón field.
The second contract was for one additional drilling rig in Vaca Muerta, which mobilized in Q1. In March, we announced award of a two-year contract for the provision of platform drilling services for Trident in Brazil on their Pampo platform, which also includes the reactivation of the rig. We also announced the four-year contract extension from Equinor on nine of the 12 incumbent platforms. Following the contract award, Archer remains the largest provider of platform drilling services for Equinor globally. Finally, in April, we announced award of a two-year contract extension for a customer in the UK on two of their platforms. With a total of more than $1 billion in contract awards, our firm backlog is estimated to be in excess of $2.5 billion. Adding the options included in our contract, we estimate our backlog including options at roughly $4 billion. Next slide, please.
In general, we remain optimistic about the development of the oil service industry in general and for Archer in particular. We focus on the growing P&A market in mature areas. Looking at our core market areas, we anticipate a particular high growth rate for our operation in the UK driven by increased well P&A activity as well as a larger offering within well services following the acquisition of the coil tubing business and Romar-Abrado during 2023. Historically, our growth has been particularly high in our well services division, and this growth has been driven by international expansion. We expect we will be able to grow this business segment further, particularly internationally. For our operation in Norway, we have a strong market position both for our platform operation and well services division.
We will continue to drive operational excellence and increase our offering, exploiting our large organization and presence on platforms to drive margin and revenue also going forward. Argentina has meaningful growth potential in the medium and long term, given the country is successfully developing their vast oil and gas resources. We grew significantly last year and have guided for further growth this year. Moving to slide 8. As stated earlier, we see very positive market fundamentals for Archer P&A service offering. The offshore decommissioning market is huge, and Rystad estimates the liabilities of the operators to represent some $240 billion globally towards 2050. Of the total decommissioning activity, roughly 50% is related to the plugging and abandonment of wells, which is Archer's core competence. The potential is particularly high in our home market with an estimated $89 billion in total decommissioning spending or close to 40% of global activity.
The strongest activity in the near term is the decom market in the UK. The global offshore decom market has grown considerably the last few years and is furthermore expected to continue growth towards 2050. This market, which only to a lesser degree is impacted by fluctuations in the oil price, will underpin profitable growth for Archer for decades to come. Archer offers a unique combination of drilling operation and a broad set of well services tailored for the plugging and abandonment operation as Archer's strategy is to become the preferred P&A service provider in the industry. Archer has developed methods and technology within P&A and decommissioning over years, and recent acquisitions have complemented our internal service offering, which has resulted in Archer having the broadest method and the most advanced P&A tools offering within the industry. Next slide.
Before going into the Q1 performance by segment, I wanted to briefly remind you about some key characteristics of our businesses. Firstly, our platform operation is managing the drilling facilities and operations on the majority of the platforms in the North Sea. This is a stable, growthy business with strong cash generation, having contributed about $40 million in annual cash contribution over the last few years, even during COVID. We have a significant firm backlog of $1.8 billion with North Sea oil majors like Equinor, with further upside of $800 million from contracted options. In addition to being a great standard of business, platform operation enables us to upsell our well service business. As you might understand, being present on about 50% of the platforms in the North Sea gives us significant competitive advantage.
In addition, we own two modular drilling rigs that are critical for multi-year plug and abandonment campaigns or P&A projects. Well services is our most valuable business division today. In this division, we develop tools, technology, and services that help improve well performance and eventually close down the well, or P&A, as we say in the industry. Well services account for more than 40% of total EBITDA. The division had annual EBITDA growth for about 29% from 2017 to 2023, of which 26% was organic. To continue our profitable growth within this segment, we have mainly three focus areas for 2024: increased footprint outside internationally, position Archer as a broader provider of well services for heavy intervention and well P&A, and three, continue to consolidate the market and drive expanded offerings and synergies.
Land drilling is a well-run operation, and it's the largest drilling service contractor in—sorry—and the largest drilling service contractor in the country with a market share just shy of 30%. We are regarded as the best drilling contractor in the country, and our rigs were preferred and mobilized first after COVID. And this is in competition with major drilling contractors like H&P, Nabors, and Ensign. The market is now improving on the back of new oil and gas pipelines coming into place, with Vaca Muerta set to account for the majority of Argentina's production growth. EBITDA grew 75% in 2023 and an additional growth of 15%-20% in 2024. Note, there is a lot of volatility in exchange rates and inflation in Argentina. Our contracts are structured to keep these fluctuations largely neutral for Archer EBITDA over time.
We have, since 2015, had a strategy to grow Argentina with our own resources. Since 2016, we have repatriated about $70 million of cash from Argentina, of which $3 million came in Q1 2024. With that, I hand the word over to Espen.
Thank you, Dag. Operational revenue in well services increased by 10% over the quarter, ending at $69 million. Compared to same quarter last year, the increase was in excess of 35%. EBITDA ended at $14.7 million for the quarter, which represents an increase of 16% from previous quarter and in excess of 90% compared to last year. The growth in EBITDA is fueled by both increased activity and margin expansion, and we recorded an EBITDA margin exceeding 21% in the quarter in this division.
We continue our strong performance and activity in our key regions, and we successfully deliver on our international growth strategy by accelerating increased activity internationally, driven this quarter by increased activity in the Middle East, U.K., and America. Next slide, please. Operational revenue in platform operations increased moderately over the quarter, ending at $112 million. Following a very strong fourth quarter, EBITDA came in at $12 million, in line with the result in the first quarter 2023. The EBITDA and revenue were impacted by scheduled downtime for our modular rig Topaz in the quarter. In the quarter, we saw continued high activity for engineering both in the North Sea and in Brazil. Our modular rig continued with safe and efficient operations, however, as commented, with less operational days in the quarter due to scheduled maintenance.
As Dag mentioned, we secured an important contract for Trident in Brazil for one platform, in addition to securing new four-year contract extension for nine rigs with Equinor in Norway. Next slide, please. Our revenue from land drilling increased moderately compared to previous quarter, ending at $78.5 million. EBITDA ended at $7.2 million, representing an increase of $1.7 million compared to previous quarter on the back of higher activity and strong performance. Following our investment in three new rigs in the fourth quarter, we mobilized the first Flex rig for Pan American in the south of Argentina during the first quarter. The general activity for our land drilling division remained solid with safe operational performance. As mentioned by Dag, we signed two contracts in January this year with Pan American, adding some $125 million of additional backlog, providing further visibility going forward. Next slide, please.
Looking at slide 13, total revenue in the quarter of $308.3 million represents an increase of $41.7 million, or a 16% increase from the same quarter last year, driven by increased activity in well services and land drilling division. With an underlying EBITDA of $32.9 million, our adjusted EBITDA margin ended at 10.7%. After adjusting for exceptional items of $2.1 million in the quarter, reported EBITDA ended at $30.9 million. This is an increase of $5.7 million, or 23% compared to first quarter last year. As already mentioned, the increase in EBITDA is attributable to a general increase in activity driven by international growth with higher contribution in our well services division, as well as higher activity in land drilling. Our net interest expense in the first quarter totaled $12.4 million, in line with previous quarters but slightly higher than first quarter last year.
The debt fees incurred in relation to the refinancing in 2023 will be amortized over the duration of the loans, and we have singled out this line item in the P&L. For first quarter, this amortization of prepaid debt fees amounted to $1.7 million. We have a large negative non-cash accounting impact from foreign exchange movements in the quarter, primarily driven by the depreciation of Norwegian kroner towards US dollars. Net income for first quarter ended at -$10.8 million. However, the adjusted net income, when adjusting primarily for foreign exchange impact and amortization of prepaid debt fees, ended at +$2.6 million. Next slide, please. Moving to slide 14, we note that cash and cash equivalents at the quarter end was $57.4 million. Equity of $175.6 million reduced compared to year-end following translation adjustment of Norwegian kroner, denominated goodwill, as well as the recorded net loss in the quarter.
As outlined at the end of the table, we note that we are reducing the leverage ratio in the quarter and came down from 2.9 at the end of 2023 to 2.8 at the end of the first quarter. Slide 15, please. We are reiterating our financial guidance for 2024. We are on track to reaching these key metrics. Archer expects solid improvements in financial performance in 2024 compared to 2023 on the back of a strong backlog and market position. EBITDA for 2024 is expected 15%-20% higher than 2023, CapEx between 4%-5% of revenue, and we expect leverage ratio between 2.4-2.7 towards the end of the year. With that, I will hand the call over to the operator for any questions. Thank you.
Thank you.
Drew, will you please open the line for questions?
Of course. Thank you. We will now start today's Q&A session. To register a question, please press star, followed by one on your telephone keypad. To withdraw your question, please press star, followed by two. Our first question today comes from Christopher Møllerløkken from SB 1 Markets. Your line is now open. Please proceed.
Thank you. This is Christopher Møllerløkken from SB 1 Markets. Dag and Espen, could you please remind us regarding how you will mobilize new rigs in your onshore drilling business in Argentina? You mentioned that you mobilized one rig during Q1, but I assume there will be two more coming during this year.
Yes, that is correct. We will mobilize two more flex rigs in the year, one in Q2 and one in Q3. However, those will replace all the rigs that we are taking out of service. So if you look at the end of the year, we should have the same rig count as we had in Q1. That's the big picture. If you look a bit more into the details, we will actually have a bit more drilling activity during the summer for one more client. And we have a few prospects as well that might add a rig in the second half for another client. So technically, what we are guiding on today is that we are going to in the guidance is that we replace two existing rigs with two new ones, one in Q2 and one in Q3.
Thank you. And in terms of the extension you received from Equinor during Q1 on your platform operation business, given the fact that they did reduce the amount of platforms you are working on, although you still remain the largest operator, do you view it more as a reflection of Equinor broadening the supplier base, or were your competitors more competitive in terms of pricing of this work versus the bid from you?
I think there are many factors that make Equinor reallocate a bit of the platforms. Our feedback is twofold. There has been a wish and strong push from the other contractors to get bigger, to have meaningful presence, and be able to offer the same service as Archer. But we were also informed in the bid review or tender review from Equinor that our prices for the extensions were higher than our competitors. So we believe it's time to push prices in this industry. So we did that. But I think the underlying fundamental was that supply chain in Equinor and our competitors wanted to have a larger operation in Norway to supply the same service as Archer.
Final question. The well services business, probably the most international of the businesses you have, where do you see the biggest growth potential there in terms of geographies?
So the biggest geographies in size is really in the U.K. and in Brazil. Okay? So Brazil, we're taking step by step by step, and it's been growing quite well. In addition, we have in our growth plans a very upcoming area as we are waiting for a big award on a contract in the Middle East that will grow business quite significantly. And then we are also starting a new venture into one of the other countries in the Middle East that we think is going to fuel the growth from 2025 onwards. So in a way, those are the big areas. Of course, U.S. offshore is a good market for us. But our services, deep water offshore, they are still a lot in exploration and new wells. They're not maintaining their wells. They're not closing down the wells offshore U.S. yet or Gulf of Mexico.
What they do is typically on the shelf, where they use local players. So the international competition has not really for our services, not really matured yet. But we believe that long-term to be a big growth market for us, deepwater Gulf of Mexico.
Thank you.
As a reminder, if you would like to ask a question today, please press star, followed by one on your telephone keypad. To withdraw your question, please press star, followed by two. We have no further questions in the queue at this time. That concludes today's Q&A session. Apologies, we've had a last-minute question registered from Børge Bakke from Fearnley Securities. Your line is now open. Please go ahead.
Hi. Good morning, guys. Thanks for taking my questions. Could you just talk a bit about the current M&A environment and potential deals, or how have you guys experienced the market as of today? Thank you.
Thank you for the question. I think it's manifested with the oil and gas M&A market. We continue to explore opportunities, both minor and larger transactions, for the right synergies, the right growth, and the right focus. We see there are deals in the market coming to the market. Not so many transactions that take place, but we have seen Weatherford , especially being more aggressive lately, and also the big acquisition by Schlumberger. I think what you see is that the larger companies are looking again. If you were back 18 months, I don't think the large oilfield integrated services companies were looking. Now, with their high share price and valuation and not so big competition for the transactions, it's quite a treat for them to do transactions. And it's more accepted for them to also invest in oil and gas again.
There was a lot of pressure, and I think that pressure has kind of removed. But at the same time, they remain, I think, very disciplined. So I think we will continue to explore what can drive our growth in terms of our geographies and our product offering and continue to be very disciplined and not buy companies for the sake of growth, but make sure it gives us the right cash profile, the right payback, the right equity transaction metrics, but not the least, also fit with our strategy and how we can position with certain customers, certain projects.
Okay. That's great. Thank you. And if I may, so would you say that you are more entitled to enter into small bolt-on transactions rather than large acquisitions? Is that a fair assumption?
I think that's a difficult question to answer. I don't want to speculate in the future for you. But I think it's easier to do smaller bolt-on transactions than to actually do larger transformation transactions. But the whole industry continues to explore across large and small companies, I would say. We'll just have to wait and see what comes up and how it will play out.
Makes sense. Thank you so much.
We have no further questions in the queue at this time. I'll now hand back over to Dag Skindlo for any closing remarks.
Thank you. We appreciate everyone joining us for this quarter's call. We look forward to speaking to you next quarter. Thank you and have a good day.